Madras High Court Upholds Rejection of Abnormally Low Bid and Cancellation of Tender

The Hon’ble Madras High Court, in M/s. P & C Projects Pvt. Ltd. v. Union of India (W.P. Nos. 9067 & 10127 of 2026, judgment dated April 16, 2026), dismissed a challenge to the rejection of the lowest (L-1) bid and cancellation of a tender process on the ground of an “abnormally low bid,” reaffirming the limited scope of judicial review in contractual and tender matters.

The dispute arose from a tender for the “Revamping of Trunk Infrastructure facilities” at the MEPZ Special Economic Zone, Chennai. The petitioner emerged as the L-1 bidder with a quote of approximately ₹350.30 crore, nearly 23.45% below the estimated project cost of ₹457.62 crore. Upon seeking detailed cost justification, the Tender Evaluation Committee (TEC) found the explanation inadequate and concluded that the bid reflected systemic under-pricing and was not viable for execution. The bid was accordingly rejected, and the entire tender process was cancelled, followed by issuance of a fresh tender.

The petitioner challenged the decision on multiple grounds, including the absence of a prescribed “viability range,” arbitrariness in rejecting an L-1 bid, and prejudice caused by disclosure of bid values prior to re-tendering.

Before the Court, the principal issue was whether rejection of an abnormally low bid and consequent cancellation of the tender warranted interference under Article 226 of the Constitution.

At the outset, the Court reiterated the well-settled principles governing judicial review in tender matters, emphasizing that courts do not sit in appeal over commercial or technical decisions of expert bodies. Interference is confined to cases involving arbitrariness, mala fides, irrationality, or perversity.

Addressing the contention regarding absence of a pre-declared viability range, the Court held that it is not mandatory for every tender to prescribe such a range. Authorities are entitled to rely on the framework under the General Financial Rules, 2017 and the Office Memorandum dated February 6, 2020, to identify and assess abnormally low bids. In the present case, the petitioner was afforded an opportunity to justify its pricing, and the decision to reject the bid was taken upon expert evaluation by the TEC.

The Court further observed that no bidder acquires a vested right to award of contract merely by being the lowest bidder. Where the competent authority, acting on expert advice, finds a bid to be unworkable or potentially compromising project quality, it is entitled to reject such bid in public interest.

On facts, the Court noted that similarly low bids submitted by L-2 and L-3 bidders were also rejected, thereby negating any allegation of mala fide intent or favouritism. Mere allegations of mala fides, in the absence of specific material, were held insufficient to warrant judicial interference.

While the Court acknowledged that disclosure of bid values prior to re-tendering could potentially prejudice bidders, it held that such disclosure, though undesirable, does not by itself render the tender process arbitrary or illegal, particularly where a fresh tender is issued with revised conditions and estimates.

The Court also declined to substitute its own assessment for that of the expert committee, holding that evaluation of bid viability involves technical and commercial considerations best left to domain experts.

Accordingly, finding no arbitrariness, mala fides, or perversity in the decision-making process, the Court dismissed the writ petition, upheld the cancellation of the tender, and permitted the fresh tender process to proceed.